Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37809 NeuroBo Pharmaceuticals, Inc. (Exact name of Registrant as specified in its charter) Delaware 47-2389984 (State or other j ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2021 (Exact name of Registrant as specified in its charter) Delaware 47-2389984 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 200 Berkeley Street, Office 19th Floor (Address of principal executive offices) (Zip Code) Bost ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37809 NeuroBo Pharmaceuticals, Inc. (Exact name of Registrant as specified in its charter) Delaware 47-2389984 (State or ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2020 OR ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37809 NeuroBo Pharmaceuticals, Inc. (Exact name of Registrant as specified in its charter) Delaware 47-2389984 ( ...

PART I FINANCIAL INFORMATION [Financial Statements (unaudited)](index=3&type=section&id=ITEM%201%3A%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, with notes detailing key events and financial health [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets were **$15,552 thousand**, primarily cash, with total liabilities of **$3,214 thousand** and stockholders' equity of **$12,338 thousand** Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $15,243 | $14,118 | | **Total assets** | $15,552 | $14,468 | | **Total current liabilities** | $3,132 | $2,082 | | **Total liabilities** | $3,214 | $2,176 | | **Total stockholders' equity** | $12,338 | $12,292 | | **Total liabilities and stockholders' equity** | $15,552 | $14,468 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the three and six months ended June 30, 2020, net losses were **$2,384 thousand** and **$7,114 thousand**, respectively, primarily due to increased general and administrative expenses Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2020** | **2019** | **2020** | **2019** | | Research and development | $674 | $948 | $2,826 | $2,748 | | General and administrative | $1,718 | $939 | $4,315 | $1,590 | | **Total operating expenses** | **$2,392** | **$1,887** | **$7,141** | **$4,338** | | **Loss from operations** | **($2,392)** | **($1,887)** | **($7,141)** | **($4,338)** | | **Net loss** | **($2,384)** | **($1,901)** | **($7,114)** | **($4,365)** | | **Net loss per share, basic and diluted** | **($0.15)** | **($0.37)** | **($0.44)** | **($0.84)** | [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) Stockholders' equity increased from **$12,292 thousand** to **$12,338 thousand** by June 30, 2020, driven by a **$7,500 thousand** equity financing largely offset by a **$7,114 thousand** net loss - In the second quarter of 2020, the company issued **750,000 shares** of common stock in an equity financing, generating **$7,500 thousand** in gross proceeds[12](index=12&type=chunk) - The net loss for the six months ended June 30, 2020 was **$7,114 thousand** (reported as **$4,730 thousand** in Q1 and **$2,384 thousand** in Q2), which reduced stockholders' equity[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash used in operating activities was **$6,462 thousand**, offset by **$6,858 thousand** from financing, resulting in a **$394 thousand** net increase in cash Cash Flow Summary for the Six Months Ended June 30 (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,462) | $(2,416) | | Net cash used in investing activities | $(2) | $(25) | | Net cash provided by financing activities | $6,858 | $24,175 | | **Net increase in cash and restricted cash** | **$394** | **$21,734** | | Cash and restricted cash at end of period | $14,298 | $24,588 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail significant events, including halting NB-01 Phase 3 trials due to COVID-19, postponing NB-02 trials, a going concern warning with cash of **$14,300 thousand** sufficient only into Q2 2021, and a **$7,500 thousand** equity financing - Due to the COVID-19 pandemic, the company halted all work on Phase 3 clinical trials for its lead candidate, **NB-01**, in the first quarter of 2020 and terminated its CRO contracts[24](index=24&type=chunk) - The company is preparing an IND application for **NB-02** but intends to postpone the first human clinical trials until the first half of 2021, contingent on improved global conditions[26](index=26&type=chunk) - The company has experienced net losses since inception, with an accumulated deficit of **$44,000 thousand** as of June 30, 2020, raising substantial doubt about its ability to continue as a going concern, with cash expected to last only into Q2 2021[40](index=40&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - On April 13, 2020, the company sold **750,000 shares** of common stock at **$10 per share** in a registered direct offering, resulting in gross proceeds of **$7,500 thousand**[105](index=105&type=chunk)[106](index=106&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=34&type=section&id=ITEM%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, highlighting the halt of **NB-01** Phase 3 trials due to COVID-19, increased net loss from higher G&A expenses, and substantial doubt about going concern with **$14,300 thousand** cash projected only into Q2 2021 - Due to the COVID-19 pandemic and to conserve financial resources, the company has indefinitely postponed Phase 3 clinical trials for **NB-01** and is exploring alternative regulatory pathways, such as for an orphan drug[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - The company's cash of **$14,300 thousand** as of June 30, 2020, is expected to fund operations into the second quarter of 2021, which raises substantial doubt about its ability to continue as a going concern[146](index=146&type=chunk)[151](index=151&type=chunk) Comparison of Operating Results (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2020** | **2019** | **2020** | **2019** | | Research and development | $674 | $948 | $2,826 | $2,748 | | General and administrative | $1,718 | $939 | $4,315 | $1,590 | | **Net loss** | **($2,384)** | **($1,901)** | **($7,114)** | **($4,365)** | - G&A expenses for the six months ended June 30, 2020, increased by **$2,700 thousand** compared to the prior year, mainly due to costs of operating as a public company, including legal, audit, and D&O insurance premiums[177](index=177&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=ITEM%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states this item is not applicable, indicating no significant exposure to market risks requiring quantitative and qualitative disclosure - This section is **not applicable** to the company for the reporting period[206](index=206&type=chunk) [Controls and Procedures](index=46&type=section&id=ITEM%204%3A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness in accounting for clinical trial costs, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2020, due to a material weakness[210](index=210&type=chunk) - The material weakness relates to internal control deficiencies in accounting for clinical trial costs and related supply materials, which led to misstatements discovered during the audit/review process[211](index=211&type=chunk) - Remediation efforts are underway, including adding more experienced accounting personnel, improving clinical site expense monitoring, and retaining qualified outside consultants[214](index=214&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=49&type=section&id=ITEM%201%3A%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is **not currently a party** to any legal proceedings expected to have a material adverse effect on its business[216](index=216&type=chunk) [Risk Factors](index=49&type=section&id=ITEM%201A%3A%20Risk%20Factors) This section updates risk factors, focusing on postponing **NB-01** Phase 3 trials due to COVID-19, risks of alternative development pathways, and broader pandemic impacts on supply chains, clinical trials, and capital access - The company has postponed the initiation of Phase 3 clinical trials for **NB-01** and terminated all related CRO agreements due to the business environment and the COVID-19 pandemic[218](index=218&type=chunk)[219](index=219&type=chunk) - The company is considering alternative pathways for **NB-01**, such as development as an orphan drug, but there is no assurance of success and this path carries its own risks, such as difficulty in conducting clinical trials for rare diseases[220](index=220&type=chunk)[221](index=221&type=chunk) - The COVID-19 pandemic poses ongoing risks to the business, including potential disruption of the supply chain, manufacturing, clinical trial enrollment, and the ability to secure future financing[224](index=224&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=ITEM%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company indicates that this item is **not applicable** for the reporting period - This section is **not applicable**[225](index=225&type=chunk) [Default upon Senior Securities](index=51&type=section&id=ITEM%203%3A%20Default%20upon%20Senior%20Securities) The company indicates that this item is **not applicable**, signifying no defaults on senior securities have occurred - This section is **not applicable**[226](index=226&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=ITEM%204%3A%20Mine%20Safety%20Disclosures) The company indicates that this item is **not applicable**, as it is not involved in mining operations - This section is **not applicable**[227](index=227&type=chunk) [Other Information](index=51&type=section&id=ITEM%205%3A%20Other%20Information) The company disclosed a five-year manufacturing and supply agreement with Dong-A ST on June 7, 2020, for **NB-02** drug product and placebo for R&D and its first human clinical trial - On June 7, 2020, the company entered into a manufacturing and supply agreement with **Dong-A ST** for its **NB-02** drug product and placebo to be used in R&D and the first human clinical trial[228](index=228&type=chunk) [Exhibits](index=52&type=section&id=ITEM%206%3A%20Exhibits) This section lists exhibits filed with the 10-Q report, including documents related to the April 2020 equity financing, the new manufacturing agreement for **NB-02**, and officer certifications - Key exhibits filed with this report include documents related to the April 2020 equity financing and the new manufacturing agreement for **NB-02** with **Dong-A ST** dated June 7, 2020[231](index=231&type=chunk) SIGNATURES - The quarterly report was signed on **August 11, 2020**, by **Richard Kang**, President and Chief Executive Officer[235](index=235&type=chunk)

Financial Performance - The company reported a net loss of $4,730,000 for the three months ended March 31, 2020, compared to a net loss of $2,464,000 for the same period in 2019, indicating an increase in loss of approximately 91.8%[10]. - Total operating expenses for Q1 2020 were $4,749,000, up from $2,451,000 in Q1 2019, reflecting an increase of approximately 93.6%[10]. - The company reported a comprehensive loss of $4,764,000 for the three months ended March 31, 2020, compared to a comprehensive loss of $2,466,000 for the same period in 2019[10]. - The company expects to continue incurring net losses and negative cash flows from operations into the foreseeable future, raising substantial doubt about its ability to continue as a going concern[40]. - The company has experienced net losses and negative cash flows from operating activities since inception, relying on debt and equity financings to fund operations[40]. Assets and Liabilities - As of March 31, 2020, total assets decreased to $11,535,000 from $14,468,000 as of December 31, 2019, representing a decline of approximately 20.2%[8]. - Total current assets decreased from $14,118,000 as of December 31, 2019, to $11,211,000 as of March 31, 2020, a decline of approximately 20.5%[8]. - Total liabilities increased from $2,176,000 as of December 31, 2019, to $3,795,000 as of March 31, 2020, an increase of approximately 74.4%[8]. - Cash and restricted cash at the end of Q1 2020 totaled $9,814,000, down from $13,923,000 at the beginning of the period, marking a decrease of approximately 29.5%[15]. - The company had $9.8 million in cash as of March 31, 2020, which is expected to fund operations through the first quarter of 2021[37][41]. Research and Development - Research and development expenses for Q1 2020 were $2,152,000, compared to $1,800,000 in Q1 2019, an increase of approximately 19.6%[10]. - The company is considering marketing NB-01 as a nutraceutical product and may conduct feasibility studies for a rare disease relevant to NB-01[25]. - The company plans to postpone the first human clinical trials for NB-02 until global health conditions improve, aiming to commence in Q1 2021[26]. - The company has directed its CRO partners to cease all work on Phase 3 clinical trials for NB-01 due to difficulties in the short to medium term[24]. - The company is supporting activities to lift the FDA's partial clinical hold on Gemcabene and is exploring trial opportunities in China[27]. Stock and Financing - The company raised a total of $16.8 million from the issuance of Series A redeemable convertible preferred stock and $24.2 million from Series B redeemable convertible preferred stock in 2019[38]. - The company raised $7.5 million in gross proceeds from a registered direct offering of 750,000 shares at $10 per share on April 16, 2020[129]. - The company has a weighted average of 15,670,800 common shares outstanding for Q1 2020, compared to 5,166,812 shares in Q1 2019, indicating a substantial increase in shares outstanding[10]. - The company’s stockholders may experience significant dilution if additional funds are raised through equity securities[41]. - The company has not recognized any revenue under the Beijing SL Agreement as of March 31, 2020[90]. Agreements and Commitments - The company agreed to make milestone payments totaling up to $37 million under the Pfizer Agreement, contingent on achieving specific milestones[79]. - The Beijing SL Agreement includes a non-refundable upfront payment of $2.5 million, received in October 2019, with additional milestone payments totaling up to $26 million possible[92]. - Future minimum payments under the cultivation service agreement with Xiehecheng are projected to total $572,000 from 2020 to 2022[77]. - The company has committed up to $1 million to support the further development of Gemcabene under the Contingent Value Rights Agreement[70]. - The exclusive license agreement with Pfizer for Gemcabene includes milestone and royalty payments on future sales[78]. Expenses and Liabilities - Accrued liabilities increased to $2,411,000 as of March 31, 2020, up from $1,422,000 in the previous year, primarily due to external research and development expenses[66]. - The Company incurred approximately $675,000 in termination expenses related to contract research organizations (CROs) during the first quarter of 2020[66]. - The New Boston Lease has a monthly rental cost of $21, with total minimum lease payments projected at $214,000 through December 31, 2020[73]. - The total lease liabilities recognized on the consolidated balance sheet as of March 31, 2020, amounted to $111,000, with a long-term portion of $89,000[76]. - The New Boston Lease and Boston Lease expenses totaled $115,000 for the three months ended March 31, 2020, including a termination fee of $83,000[73].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37809 NeuroBo Pharmaceuticals, Inc. (Exact name of Registrant as specified in its charter) h Delaware 47‑2389984 (State o ...

PART I – FINANCIAL INFORMATION This section presents Gemphire Therapeutics Inc.'s unaudited condensed financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1 – FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201%20Financial%20Statements) This section presents Gemphire Therapeutics Inc.'s unaudited condensed financial statements, including balance sheets, statements of comprehensive loss, changes in stockholders' (deficit) equity, and cash flows, along with detailed notes explaining the company's financial position, operations, significant accounting policies, and key events such as the proposed merger and license agreements [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) This section provides a snapshot of Gemphire's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Balance Sheet Highlights (in millions): | Metric | September 30, 2019 (in millions) | December 31, 2018 (in millions) | | :-------------------------- | :------------------- | :------------------- | | Cash and cash equivalents | $1.855 | $18.954 | | Total current assets | $2.048 | $19.686 | | Total assets | $2.048 | $19.694 | | Total current liabilities | $3.073 | $11.919 | | Total liabilities | $3.073 | $11.920 | | Total stockholders' (deficit) equity | $(1.025) | $7.774 | | Accumulated deficit | $(94.262) | $(84.111) | - Total assets decreased significantly from **$19.694 million** at December 31, 2018, to **$2.048 million** at September 30, 2019[8](index=8&type=chunk) - The company's stockholders' equity shifted to a deficit of **$(1.025) million** as of September 30, 2019, from **$7.774 million** at December 31, 2018[8](index=8&type=chunk) [Condensed Statements of Comprehensive Loss](index=4&type=section&id=Condensed%20Statements%20of%20Comprehensive%20Loss) This section details Gemphire's financial performance over specific periods, focusing on operating expenses and net loss Condensed Statements of Comprehensive Loss Highlights (in millions): | Metric | Three Months Ended Sep 30, 2019 (in millions) | Three Months Ended Sep 30, 2018 (in millions) | Nine Months Ended Sep 30, 2019 (in millions) | Nine Months Ended Sep 30, 2018 (in millions) | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total operating expenses | $2.318 | $5.906 | $7.467 | $19.504 | | Net loss | $(3.430) | $(6.079) | $(10.151) | $(19.981) | | Net loss per share (Basic and diluted) | $(0.240) | $(0.430) | $(0.710) | $(1.460) | - Net loss decreased by **$2.649 million** for the three months ended September 30, 2019, compared to the same period in 2018, and by **$9.830 million** for the nine months ended September 30, 2019, primarily due to reduced operating expenses[11](index=11&type=chunk) [Condensed Statements of Changes in Stockholders' (Deficit) Equity](index=5&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Stockholders'%20(Deficit)%20Equity) This section tracks changes in Gemphire's equity, including common stock, additional paid-in capital, and accumulated deficit over time Changes in Stockholders' (Deficit) Equity (in millions): | Metric | Balance at January 1, 2019 (in millions) | Balance at September 30, 2019 (in millions) | | :-------------------------- | :------------------------- | :-------------------------- | | Common Stock (Shares) | 14,265,411 | 14,872,411 | | Common Stock (Amount) | $0.022 | $0.023 | | Additional Paid–In Capital | $91.863 | $93.214 | | Accumulated Deficit | $(84.111) | $(94.262) | | Total Stockholders' (Deficit) Equity | $7.774 | $(1.025) | - The company's accumulated deficit increased from **$(84.111) million** at January 1, 2019, to **$(94.262) million** at September 30, 2019, reflecting ongoing net losses[14](index=14&type=chunk) - **607,000 restricted stock awards** were issued during the three and nine months ended September 30, 2019, contributing to the increase in common stock shares[14](index=14&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This section summarizes Gemphire's cash inflows and outflows from operating, investing, and financing activities Condensed Statements of Cash Flows Highlights (in millions): | Metric | Nine Months Ended Sep 30, 2019 (in millions) | Nine Months Ended Sep 30, 2018 (in millions) | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6.825) | $(17.798) | | Net cash (used in) provided by financing activities | $(10.259) | $23.131 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(17.084) | $5.333 | | Cash, cash equivalents and restricted cash at end of period | $1.870 | $23.806 | - Net cash used in operating activities decreased by **$10.973 million** for the nine months ended September 30, 2019, compared to the same period in 2018[18](index=18&type=chunk) - Financing activities shifted from providing **$23.131 million** in 2018 (due to common stock sale) to using **$(10.259) million** in 2019 (due to term loan repayment)[18](index=18&type=chunk) [Notes to Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed financial statements [1. The Company and Basis of Presentation](index=7&type=section&id=1.%20The%20Company%20and%20Basis%20of%20Presentation) Gemphire Therapeutics Inc. is a clinical-stage biopharmaceutical company focused on developing therapies for dyslipidemia and NAFLD/NASH, with gemcabene as its primary product candidate. The company has incurred significant operating losses and faces substantial doubt about its ability to continue as a going concern, necessitating a proposed all-stock merger with NeuroBo Pharmaceuticals, Inc - Gemphire is a clinical-stage biopharmaceutical entity focused on developing and commercializing therapies for dyslipidemia and NAFLD/NASH, with gemcabene as its primary product candidate[20](index=20&type=chunk) - The company entered into a definitive all-stock merger agreement with NeuroBo Pharmaceuticals, Inc. on July 24, 2019 (amended October 29, 2019)[20](index=20&type=chunk) - As of September 30, 2019, Gemphire had an accumulated deficit of **$94.3 million** and a total stockholders' deficit of **$1 million**, with cash and cash equivalents of **$1.9 million**, which are not sufficient to fund operations for the next 12 months, raising substantial doubt about its going concern ability[28](index=28&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines Gemphire's key accounting policies, including the use of estimates, classification of cash and cash equivalents, fair value measurements, and the expensing of general and administrative and research and development costs. It also details the company's revenue recognition under ASC Topic 606 and the adoption of several recent accounting pronouncements, none of which had a material impact on its financial statements - The company follows ASC Topic 606 for revenue recognition but has not recognized any revenue to date, though the Beijing SL Agreement will have future implications[37](index=37&type=chunk) - Research and development expenses, including compensation, preclinical/clinical studies, regulatory activities, and license fees, are expensed as incurred[36](index=36&type=chunk) - Gemphire adopted ASU 2016-01 (Financial Instruments), ASU 2016-02 (Leases), ASU 2016-18 (Restricted Cash), ASU 2017-09 (Stock Compensation), and ASU 2018-07 (Nonemployee Share-Based Payment) with no material impact on its financial statements[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk) [3. Merger Agreement](index=12&type=section&id=3.%20Merger%20Agreement) Gemphire entered into an all-stock merger agreement with NeuroBo Pharmaceuticals, Inc., where NeuroBo will be the surviving entity and accounting acquirer. Post-merger, Gemphire security holders are expected to own approximately 3.74% of the combined company, which will focus on neurodegenerative diseases and operate under the NeuroBo name and ticker symbol. The agreement also includes Contingent Value Rights (CVRs) for Gemphire stockholders related to future gemcabene monetization and specifies executive severance and restricted stock awards - Gemphire entered into an all-stock merger agreement with NeuroBo Pharmaceuticals, Inc., with NeuroBo surviving as a wholly-owned subsidiary and considered the accounting acquirer[57](index=57&type=chunk)[58](index=58&type=chunk) - Post-merger, Gemphire security holders are expected to own approximately **3.74%** and NeuroBo security holders approximately **96.26%** of the combined company on a fully-diluted basis[60](index=60&type=chunk) - The combined company will be named NeuroBo Pharmaceuticals, Inc., trade under 'NRBO', and focus on neurodegenerative diseases, with NeuroBo's CEO leading and its designees forming the majority of the board[64](index=64&type=chunk) - Gemphire stockholders will receive Contingent Value Rights (CVRs) entitling them to **80%** of future gross consideration from gemcabene rights (excluding the Beijing SL upfront payment), with the combined company committing **$1 million** for gemcabene development through Q1 2020[66](index=66&type=chunk)[67](index=67&type=chunk) - Executives received reduced cash severance and restricted stock awards (Dr. Gullans: **300,000 shares**, Dr. Bisgaier: **100,000 shares**, Mr. Reno: **100,000 shares**) vesting immediately prior to the merger's effective time[68](index=68&type=chunk)[69](index=69&type=chunk) [4. Accrued Liabilities](index=15&type=section&id=4.%20Accrued%20Liabilities) Accrued liabilities primarily consist of compensation, legal costs, and non-operating transactional costs, showing a slight decrease from December 31, 2018, to September 30, 2019 Accrued Liabilities (in millions): | Category | September 30, 2019 (in millions) | December 31, 2018 (in millions) | | :-------------------------------- | :------------------- | :------------------- | | Accrued compensation and other payroll liabilities | $0.092 | $0.137 | | Legal costs | $0.052 | $0.106 | | Non-operating transactional costs | $0.176 | $0.000 | | Total Accrued Liabilities | $0.396 | $0.438 | [5. Debt](index=15&type=section&id=5.%20Debt) Gemphire fully prepaid its term loan with Silicon Valley Bank (SVB) in January 2019, including principal, interest, and a final payment fee. The company remains obligated for a $350,000 success fee upon the merger's completion and an outstanding warrant to SVB - The company fully prepaid its term loan with Silicon Valley Bank (SVB) on January 28, 2019, including approximately **$8.9 million** in principal and interest, and a **$1.0 million** final payment fee[74](index=74&type=chunk) - A success fee of **$350,000** (**3.5%** of the funded principal) will be triggered upon the completion of the merger[75](index=75&type=chunk) - A warrant to purchase **36,000 shares** of common stock issued to SVB remains outstanding and exercisable[75](index=75&type=chunk) [6. Commitments and Contingencies](index=16&type=section&id=6.%20Commitments%20and%20Contingencies) This section details the Pfizer License Agreement for gemcabene, which includes potential milestone and royalty payments, though no liabilities were recorded due to significant uncertainty. It also notes the expiration of the company's headquarters lease in August 2019, with no new office space currently leased - The Pfizer License Agreement for gemcabene includes potential milestone payments up to **$37 million** and tiered royalties on future sales, but no liabilities were recorded as of September 30, 2019, due to uncertainty regarding clinical trial outcomes and funding[78](index=78&type=chunk)[84](index=84&type=chunk) - The company's headquarters lease expired in August 2019, and no office space is currently being leased[79](index=79&type=chunk) Operating Lease Rent Expense (in millions): | Period | 2019 (in millions) | 2018 (in millions) | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $0.017 | $0.026 | | Nine Months Ended Sep 30 | $0.069 | $0.078 | [7. License Agreements](index=17&type=section&id=7.%20License%20Agreements) Gemphire holds an exclusive worldwide license for gemcabene from Pfizer, involving equity issuance, milestone payments, and royalties. Additionally, the company entered into the Beijing SL License and Collaboration Agreement, granting exclusive rights for gemcabene in specific Asian territories in exchange for a $2.5 million upfront payment (received October 2019), up to $6 million in developmental/regulatory milestones, up to $20 million in global net sales milestones, and tiered royalties - The Pfizer Agreement grants Gemphire a worldwide exclusive license for gemcabene, involving up to **$37 million** in milestone payments and tiered royalties on net sales[82](index=82&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - On July 23, 2019, Gemphire entered into the Beijing SL Agreement, granting an exclusive royalty-bearing license for gemcabene in mainland China, Hong Kong, Macau, and Taiwan[89](index=89&type=chunk) - Under the Beijing SL Agreement, Gemphire is eligible to receive a non-refundable upfront gross payment of **$2.5 million** (received October 2019), up to **$6 million** in developmental/regulatory milestones, up to **$20 million** in global net sales milestones, and tiered royalties ranging from mid-teens to twenty percent on net sales[91](index=91&type=chunk)[92](index=92&type=chunk) [8. Stockholders' (Deficit) Equity](index=19&type=section&id=8.%20Stockholders'%20(Deficit)%20Equity) This section details the company's common stock, warrants, and shareholder rights. As of September 30, 2019, 14,872,411 common shares were outstanding, an increase from December 31, 2018, partly due to restricted stock issuance. The company also has 1,014,204 outstanding warrants and has not declared any dividends Common Stock and Warrants Outstanding: | Metric | September 30, 2019 | December 31, 2018 | | :-------------------------- | :------------------- | :------------------- | | Common Stock Shares Outstanding | 14,872,411 | 14,265,411 | | Warrants Outstanding | 1,014,204 | 1,014,204 | - In Q1 2018, a Follow-On Offering of **3,592,858 common shares** generated net proceeds of approximately **$23.1 million**[99](index=99&type=chunk) - No dividends have been declared on common stock as of September 30, 2019[101](index=101&type=chunk) [9. Share‑Based Compensation](index=20&type=section&id=9.%20Share%E2%80%91Based%20Compensation) Gemphire's share-based compensation expense significantly decreased year-over-year. The company granted 607,000 restricted stock awards in 2019, vesting upon the merger's close, but no stock options were granted in the nine months ended September 30, 2019. Unrecognized share-based compensation cost for stock options and RSAs totals $2.7 million, expected to be recognized over 0.2 years Share-Based Compensation Expense (in millions): | Period | Three Months Ended Sep 30, 2019 (in millions) | Three Months Ended Sep 30, 2018 (in millions) | Nine Months Ended Sep 30, 2019 (in millions) | Nine Months Ended Sep 30, 2018 (in millions) | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total share-based compensation | $0.441 | $1.627 | $1.352 | $3.556 | - **607,000 restricted stock awards (RSAs)** were granted in 2019 to officers, directors, and employees, vesting immediately upon the close of the merger[111](index=111&type=chunk) - No stock options were granted during the nine months ended September 30, 2019, compared to **822,000 options** granted in the comparable 2018 period[112](index=112&type=chunk) - Unrecognized share-based compensation cost was **$2.3 million** for stock options and **$0.4 million** for RSAs as of September 30, 2019, expected to be recognized over a weighted average period of **0.2 years**[117](index=117&type=chunk) [10. Net Loss Per Common Share](index=22&type=section&id=10.%20Net%20Loss%20Per%20Common%20Share) The company reported basic and diluted net losses per share of $(0.24) and $(0.71) for the three and nine months ended September 30, 2019, respectively. Common stock equivalents, including stock options, warrants, and restricted stock awards, were excluded from diluted EPS calculations as their inclusion would be anti-dilutive Net Loss Per Share (Basic and Diluted): | Period | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss per share | $(0.24) | $(0.43) | $(0.71) | $(1.46) | - Potential common shares (stock options, warrants, restricted stock awards) were not included in diluted net loss per share calculations as their effect would have been anti-dilutive[118](index=118&type=chunk)[119](index=119&type=chunk) [11. Fair Value Measurements](index=23&type=section&id=11.%20Fair%20Value%20Measurements) Gemphire adheres to fair value accounting guidance, classifying financial instruments into a three-level hierarchy. Most financial instruments, such as cash, accounts payable, and accrued liabilities, approximate their carrying values due to their short-term nature. No instruments were measured on a recurring fair value basis during the reported periods - The company defines fair value measurements using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[120](index=120&type=chunk) - The carrying amounts of cash and cash equivalents, restricted cash, other assets, accounts payable, accrued liabilities, and other liabilities approximate their fair values due to their short-term nature[121](index=121&type=chunk) - No financial instruments were measured on a recurring fair value basis as of September 30, 2019, and December 31, 2018[122](index=122&type=chunk) [12. Income Taxes](index=23&type=section&id=12.%20Income%20Taxes) Gemphire utilizes the liability method for income taxes but reported a zero effective tax rate for the three and nine months ended September 30, 2019, and 2018, due to operating losses and a full valuation allowance on its net deferred tax assets - The effective tax rate was **zero percent** for the three and nine months ended September 30, 2019, and 2018[123](index=123&type=chunk) - A full valuation allowance has been provided on the net deferred tax assets due to incurred operating losses[123](index=123&type=chunk) [13. Defined Contribution Plan](index=23&type=section&id=13.%20Defined%20Contribution%20Plan) The company adopted a 401(k) defined contribution plan in 2017, with employer matching contributions beginning in January 2018. Employer matching contributions for the nine months ended September 30, 2019, were $60,000 - The company adopted a 401(k) defined contribution plan on September 5, 2017, effective January 1, 2017[124](index=124&type=chunk) Employer Matching Contributions (in millions): | Period | Three Months Ended Sep 30, 2019 (in millions) | Three Months Ended Sep 30, 2018 (in millions) | Nine Months Ended Sep 30, 2019 (in millions) | Nine Months Ended Sep 30, 2018 (in millions) | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Matching contributions | $0.013 | $0.030 | $0.060 | $0.084 | [14. Related Party Transactions](index=24&type=section&id=14.%20Related%20Party%20Transactions) In the first quarter of 2018, Gemphire's public offering included sales of common stock to an officer and an affiliate of an officer and board member, totaling approximately $0.6 million - In Q1 2018, **14,286 common shares** were sold to an officer for approximately **$0.1 million**, and **71,429 shares** were sold to an affiliate of an officer and board member for approximately **$0.5 million** during a public offering[126](index=126&type=chunk) [15. Subsequent Events](index=24&type=section&id=15.%20Subsequent%20Events) Key events after September 30, 2019, include an amendment to the NeuroBo merger agreement, the scheduling of the annual stockholders' meeting for December 6, 2019, the receipt of a $2.5 million upfront payment from Beijing SL, and Nasdaq granting an extension until February 10, 2020, for Gemphire to regain compliance with listing requirements, contingent on the merger's consummation - On October 29, 2019, the Merger Agreement with NeuroBo was amended to reduce the minimum net cash amount, clarify pre-closing payments, increase the board size, and extend the termination date to February 22, 2020[128](index=128&type=chunk) - The annual meeting of stockholders, including votes on the merger, is scheduled for December 6, 2019[129](index=129&type=chunk) - A non-refundable upfront payment of **$2.5 million** was received in October 2019 under the Beijing SL Agreement and recorded as a deferred revenue liability[130](index=130&type=chunk) - Nasdaq granted an extension until February 10, 2020, for Gemphire to regain compliance with minimum stockholders' equity, contingent on NeuroBo's initial listing approval and the merger's consummation[132](index=132&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Gemphire's financial condition and operational results, highlighting its status as a clinical-stage biopharmaceutical company focused on gemcabene. It details significant net losses, liquidity challenges, and the proposed merger with NeuroBo. The discussion also covers clinical trial updates, workforce reductions, and ongoing Nasdaq compliance issues, emphasizing the company's need for additional capital or the successful completion of the merger to continue operations - Gemphire is a clinical-stage biopharmaceutical company focused on developing gemcabene for dyslipidemia and NAFLD/NASH, with no products approved for sale and no revenue generated to date[140](index=140&type=chunk)[145](index=145&type=chunk) Financial Performance Summary (in millions): | Metric | Nine Months Ended Sep 30, 2019 (in millions) | Nine Months Ended Sep 30, 2018 (in millions) | | :-------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(10.151) | $(19.981) | | Accumulated deficit (Sep 30, 2019) | $94.300 | N/A | | Total stockholders' deficit (Sep 30, 2019) | $1.000 | N/A | | Cash and cash equivalents (Sep 30, 2019) | $1.900 | N/A | - The company entered into an all-stock merger agreement with NeuroBo Pharmaceuticals, Inc. on July 24, 2019, which is expected to close in Q4 2019, subject to stockholder approvals and other conditions[141](index=141&type=chunk)[171](index=171&type=chunk) - Clinical trial updates include successful Phase 2b trials for gemcabene, but a Phase 2a pediatric NAFLD trial was halted early due to 'unanticipated problems,' and the FDA maintains a partial clinical hold on studies longer than six months[147](index=147&type=chunk)[148](index=148&type=chunk)[153](index=153&type=chunk) - Gemphire faces Nasdaq compliance issues related to minimum stockholders' equity and minimum bid price, with an extension granted until February 10, 2020, contingent on the merger's consummation[158](index=158&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk) - Cash on hand of **$1.9 million** (as of Sep 30, 2019) is only sufficient through Q4 2019, excluding merger transaction costs, indicating a critical need for additional capital if the merger does not close[211](index=211&type=chunk) Operating Expenses (in millions): | Category | Three Months Ended Sep 30, 2019 (in millions) | Three Months Ended Sep 30, 2018 (in millions) | Nine Months Ended Sep 30, 2019 (in millions) | Nine Months Ended Sep 30, 2018 (in millions) | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | General and administrative | $1.250 | $2.364 | $3.772 | $7.025 | | Research and development | $1.068 | $3.542 | $3.695 | $12.479 | | Total operating expenses | $2.318 | $5.906 | $7.467 | $19.504 | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Gemphire's management, including its principal executive and financial officer, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2019, and concluded they were effective. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that disclosure controls and procedures were effective as of September 30, 2019[239](index=239&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended September 30, 2019[240](index=240&type=chunk) PART II – OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=41&type=section&id=ITEM%201.%20Legal%20Proceedings) Gemphire may be subject to claims and lawsuits in the ordinary course of business, but management believes their ultimate resolution will not have a material adverse effect on the company's financial position, results of operations, or cash flows [ITEM 1A. RISK FACTORS](index=41&type=section&id=ITEM%201A%20Risk%20Factors) This section outlines significant risks, including Gemphire's non-compliance with Nasdaq listing requirements and the potential for delisting. It emphasizes the critical uncertainties surrounding the proposed merger with NeuroBo, such as the risk of non-completion, the resulting liquidity crisis, and the potential for company dissolution. Other risks include substantial dilution for current stockholders, the uncertain value of Contingent Value Rights (CVRs), reliance on Beijing SL for gemcabene development in certain territories, and the challenge of retaining key employees during the merger process - Gemphire is not in compliance with Nasdaq's minimum stockholders' equity and minimum bid price requirements, facing potential delisting if the merger with NeuroBo is not consummated by February 10, 2020[245](index=245&type=chunk)[248](index=248&type=chunk)[252](index=252&type=chunk)[254](index=254&type=chunk) - Failure to complete the merger could lead to inadequate liquidity, requiring additional capital or potentially resulting in the dissolution and liquidation of the company, with no assurances on the amount or timing of distributions to stockholders[257](index=257&type=chunk)[259](index=259&type=chunk)[261](index=261&type=chunk) - The proposed merger will substantially dilute the voting power of current Gemphire stockholders, who are expected to own approximately **3.74%** of the combined company[265](index=265&type=chunk) - Stockholders may not receive any payment on the CVRs, which could expire valueless, as payments are contingent on specific events and consideration exceeding permitted deductions[272](index=272&type=chunk)[274](index=274&type=chunk) - The company is substantially dependent on its remaining **7 full-time employees** to facilitate the merger, and the loss of any could harm its ability to complete the transaction and maintain operations[282](index=282&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=47&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there are no unregistered sales of equity securities and use of proceeds to report [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=47&type=section&id=ITEM%203.%20Default%20upon%20Senior%20Securities) This section states that there are no defaults upon senior securities to report [ITEM 4. MINE SAFETY DISCLOSURES](index=48&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section states that there are no mine safety disclosures applicable to the company [ITEM 5. OTHER INFORMATION](index=48&type=section&id=ITEM%205.%20Other%20Information) This section states that there is no other information to report [ITEM 6. EXHIBITS](index=49&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key agreements related to the NeuroBo merger, the Contingent Value Rights (CVR) Agreement, executive employment amendments, and the License and Collaboration Agreement with Beijing SL - Key exhibits include the Agreement and Plan of Merger (2.1, 2.2), Form of CVR Agreement (2.3), various employment agreement amendments (10.1, 10.2, 10.3, 10.7, 10.8, 10.9), and the License and Collaboration Agreement with Beijing SL (10.6)[291](index=291&type=chunk)[293](index=293&type=chunk) SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report was signed by Steven Gullans, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer), on November 8, 2019[296](index=296&type=chunk)

PART I – FINANCIAL INFORMATION [ITEM 1 – FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201%20Financial%20Statements) The company presents unaudited condensed financial statements showing reduced losses but also decreased cash, raising going concern doubts [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets%20as%20of%20June%2030%2C%202019%20(unaudited)%20and%20December%2031%2C%202018) The balance sheet reflects a significant decrease in total assets and stockholders' equity due to cash reduction and loan repayment Condensed Balance Sheets (in thousands) | Metric | June 30, 2019 (unaudited) | December 31, 2018 | Change | | :-------------------------- | :------------------------ | :------------------ | :------- | | Cash and cash equivalents | $3,643 | $18,954 | $(15,311) | | Total current assets | $3,988 | $19,686 | $(15,698) | | Total assets | $4,014 | $19,694 | $(15,680) | | Term loan - current portion | $— | $9,437 | $(9,437) | | Total current liabilities | $2,050 | $11,919 | $(9,869) | | Total liabilities | $2,050 | $11,920 | $(9,870) | | Total stockholders' equity | $1,964 | $7,774 | $(5,810) | [Condensed Statements of Comprehensive Loss](index=4&type=section&id=Condensed%20Statements%20of%20Comprehensive%20Loss%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202019%20and%202018%20(unaudited)) Net loss significantly narrowed year-over-year for the three and six-month periods due to substantial cuts in operating expenses Condensed Statements of Comprehensive Loss (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | Change (YoY) | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | Change (YoY) | | :-------------------------- | :--------------------------- | :--------------------------- | :---------------- | :--------------------------- | :--------------------------- | :---------------- | | General and administrative | $1,115 | $2,574 | $(1,459) | $2,522 | $4,661 | $(2,139) | | Research and development | $1,234 | $3,960 | $(2,726) | $2,627 | $8,937 | $(6,310) | | Total operating expenses | $2,349 | $6,534 | $(4,185) | $5,149 | $13,598 | $(8,449) | | Net loss | $(2,920) | $(6,678) | $3,758 | $(6,721) | $(13,902) | $7,181 | | Basic and diluted net loss per share | $(0.20) | $(0.47) | $0.27 | $(0.47) | $(1.04) | $0.57 | [Condensed Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202019%20and%202018%20(unaudited)) Stockholders' equity decreased significantly during the first half of 2019 primarily due to net losses incurred Condensed Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at January 1, 2019 | Balance at June 30, 2019 | Change | | :-------------------------- | :------------------------- | :----------------------- | :------- | | Common Stock (Amount) | $22 | $22 | $0 | | Additional Paid-In Capital | $91,863 | $92,774 | $911 | | Accumulated Deficit | $(84,111) | $(90,832) | $(6,721) | | Total Stockholders' Equity | $7,774 | $1,964 | $(5,810) | - Share-based compensation for employees contributed **$911 thousand** to additional paid-in capital for the six months ended June 30, 2019[14](index=14&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202019%20and%202018%20(unaudited)) Cash decreased by $15.3 million in the first half of 2019, driven by operating activities and a significant loan repayment Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Net cash used in operating activities | $(5,037) | $(13,514) | $8,477 | | Net cash provided by (used in) investing activities | $— | $— | $— | | Net cash (used in) provided by financing activities | $(10,259) | $23,080 | $(33,339) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(15,296) | $9,566 | $(24,862) | | Cash, cash equivalents and restricted cash at end of period | $3,658 | $28,039 | $(24,381) | [Notes to Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20(unaudited)) The notes detail the company's going concern risk, the proposed NeuroBo merger, and the Beijing SL licensing agreement [1. The Company and Basis of Presentation](index=7&type=section&id=1.%20The%20Company%20and%20Basis%20of%20Presentation) The company is a clinical-stage biopharma with significant operating losses, raising substantial doubt about its going concern status - Gemphire Therapeutics Inc is a clinical-stage biopharmaceutical company developing therapies for dyslipidemia and NAFLD/NASH, with gemcabene as its primary product candidate[19](index=19&type=chunk)[123](index=123&type=chunk) - The company has sustained operating losses since inception, with an **accumulated deficit of $90.8 million** as of June 30, 2019, and expects losses to continue[21](index=21&type=chunk)[26](index=26&type=chunk)[128](index=128&type=chunk) - Management believes current cash and cash equivalents (**$3.6 million** as of June 30, 2019) are insufficient to fund operations for the next 12 months, raising **substantial doubt about its ability to continue as a going concern**[21](index=21&type=chunk)[26](index=26&type=chunk) - The company entered into a definitive merger agreement with NeuroBo Pharmaceuticals, Inc on July 24, 2019, in an all-stock transaction, which is **critical for its future operations**[19](index=19&type=chunk)[102](index=102&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines key accounting policies, including the expensing of R&D costs and the adoption of new accounting standards - Research and development expenses, including compensation, preclinical/clinical study costs, regulatory activities, and manufacturing support, are expensed as incurred[34](index=34&type=chunk)[158](index=158&type=chunk) - The company adopted ASU 2016-02 (Leases) on January 1, 2019, recognizing approximately **$0.1 million in lease assets and liabilities**, with no material impact on comprehensive loss or cash flows[41](index=41&type=chunk) - The company has irrevocably elected not to use the extended transition period for complying with new or revised financial accounting standards under the JOBS Act[39](index=39&type=chunk) [3. Accrued Liabilities](index=11&type=section&id=3.%20Accrued%20Liabilities) Accrued liabilities decreased slightly due to reductions in accrued compensation and R&D expenses, offset by higher legal costs Accrued Liabilities (in thousands) | Accrued Liability | June 30, 2019 | December 31, 2018 | Change | | :---------------------------------- | :-------------- | :---------------- | :------- | | Accrued compensation and other payroll liabilities | $20 | $137 | $(117) | | Legal costs | $269 | $106 | $163 | | Other research and development expenses | $54 | $135 | $(81) | | Total | $382 | $438 | $(56) | [4. Debt](index=12&type=section&id=4.%20Debt) The company fully prepaid its term loan with Silicon Valley Bank in January 2019, with a success fee contingent on the NeuroBo merger - The company fully prepaid its **$8.9 million term loan** with Silicon Valley Bank on January 28, 2019, including a **$1.0 million final payment fee**[49](index=49&type=chunk)[197](index=197&type=chunk) - A success fee of **$350,000** will be triggered upon the completion of the merger with NeuroBo[50](index=50&type=chunk)[198](index=198&type=chunk) - A warrant to purchase **36,000 shares** of common stock issued to SVB remains outstanding[50](index=50&type=chunk)[198](index=198&type=chunk) [5. Commitments and Contingencies](index=12&type=section&id=5.%20Commitments%20and%20Contingencies) The company has potential milestone and royalty payment commitments to Pfizer and a short-term headquarters lease liability - The company holds an exclusive license agreement with Pfizer for gemcabene, which includes potential milestone and royalty payments on future sales[52](index=52&type=chunk)[202](index=202&type=chunk) - As of June 30, 2019, **no liabilities were recorded for Pfizer Agreement milestone payments** due to uncertainty regarding clinical trial outcomes and funding[52](index=52&type=chunk) Lease Metrics (in thousands, except term) | Lease Metric | June 30, 2019 | December 31, 2018 | | :-------------------------------- | :-------------- | :---------------- | | Right-of-use assets | $18 | $68 | | Lease liability | $18 | $70 | | Weighted average remaining lease term | 0.2 years | 0.7 years | [6. License Agreement](index=13&type=section&id=6.%20License%20Agreement) Gemphire holds a worldwide exclusive license from Pfizer for gemcabene, requiring potential milestone payments and tiered royalties - Gemphire has a worldwide exclusive license for gemcabene from Pfizer, requiring milestone payments up to **$37 million** and tiered royalties on net sales[60](index=60&type=chunk)[61](index=61&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - The Pfizer Agreement was amended in August 2018, extending the deadline for the first commercial sale to **April 2024**[63](index=63&type=chunk)[206](index=206&type=chunk) - Pfizer received **675,250 shares** of Gemphire common stock (fair value $0.9 million) in 2015 as an initial equity payment, recorded as acquired in-process R&D expenses[62](index=62&type=chunk) [7. Stockholders' Equity](index=14&type=section&id=7.%20Stockholders'%20Equity) The company had 14.3 million shares outstanding and previously raised $23.1 million in a 2018 public offering - As of June 30, 2019, **14,265,411 shares** of common stock were issued and outstanding[64](index=64&type=chunk) - In Q1 2018, a follow-on public offering generated approximately **$23.1 million in net proceeds** from the sale of 3,592,858 common shares[66](index=66&type=chunk)[188](index=188&type=chunk) - Warrants to purchase **1,014,204 shares** of common stock were outstanding as of June 30, 2019[67](index=67&type=chunk)[85](index=85&type=chunk) [8. Share‑Based Compensation](index=15&type=section&id=8.%20Share‑Based%20Compensation) Share-based compensation expense decreased significantly year-over-year, with $2.8 million in unrecognized cost remaining Share-Based Compensation Expense (in thousands) | Expense Category | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | General and administrative | $275 | $436 | $559 | $1,147 | | Research and development | $163 | $473 | $352 | $782 | | Total share-based compensation | $438 | $909 | $911 | $1,929 | - As of June 30, 2019, **1,280,062 shares** were available for future issuance under the A&R 2015 and Inducement Plans[82](index=82&type=chunk) - Unrecognized share-based compensation cost was **$2.8 million** as of June 30, 2019, expected to be recognized over a weighted average period of 1.1 years[83](index=83&type=chunk) [9. Net Loss Per Common Share](index=17&type=section&id=9.%20Net%20Loss%20Per%20Common%20Share) Net loss per share improved significantly year-over-year due to reduced net losses, with potential dilutive securities excluded Net Loss Per Share Calculation (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss attributed to common stockholders | $(2,920) | $(6,678) | $(6,721) | $(13,902) | | Basic and diluted weighted average common shares outstanding | 14,265,411 | 14,232,313 | 14,265,411 | 13,340,941 | | Basic and diluted net loss per share | $(0.20) | $(0.47) | $(0.47) | $(1.04) | - Stock options (2,722,973) and warrants (1,014,204) were **anti-dilutive** and excluded from diluted net loss per share calculations for the six months ended June 30, 2019[85](index=85&type=chunk) [10. Fair Value Measurements](index=18&type=section&id=10.%20Fair%20Value%20Measurements) The fair values of the company's short-term financial instruments approximated their carrying values - Fair values of short-term financial instruments (cash, accounts payable, etc) approximated their carrying values as of June 30, 2019, and December 31, 2018[87](index=87&type=chunk) - No financial instruments were measured on a recurring or non-recurring fair value basis, and no transfers occurred between fair value hierarchy levels during the reported periods[88](index=88&type=chunk) [11. Income Taxes](index=18&type=section&id=11.%20Income%20Taxes) The company reported a zero effective tax rate due to operating losses and a full valuation allowance on deferred tax assets - The effective tax rate was **zero percent** for the three and six months ended June 30, 2019 and 2018[89](index=89&type=chunk) - A **full valuation allowance** was recorded on net deferred tax assets due to incurred operating losses, resulting in no income tax benefit[89](index=89&type=chunk) [12. Defined Contribution Plan](index=18&type=section&id=12.%20Defined%20Contribution%20Plan) The company's matching contributions to its 401(k) plan decreased in 2019 compared to the prior year - The company adopted a 401(k) defined contribution plan effective January 1, 2017, with employer matching contributions starting January 1, 2018[90](index=90&type=chunk) 401(k) Matching Contributions (in thousands) | Matching Contributions | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Amount | $19 | $29 | $47 | $54 | [13. Related Party Transactions](index=19&type=section&id=13.%20Related%20Party%20Transactions) A Q1 2018 public offering included share purchases by an officer and an affiliate of a board member - In Q1 2018, an officer purchased 14,286 shares for approximately **$0.1 million**, and an affiliate of an officer/board member purchased 71,429 shares for approximately **$0.5 million** in a public offering[92](index=92&type=chunk) [14. Subsequent Events](index=19&type=section&id=14.%20Subsequent%20Events) Subsequent events include a licensing deal with Beijing SL, a definitive merger agreement with NeuroBo, and a Nasdaq compliance notice [License Agreement with Beijing SL](index=19&type=section&id=License%20Agreement%20with%20Beijing%20SL) Gemphire granted Beijing SL an exclusive license for gemcabene in Greater China for an upfront payment and potential milestones - On July 23, 2019, Gemphire granted Beijing SL an exclusive license for gemcabene in mainland China, Hong Kong, Macau, and Taiwan[93](index=93&type=chunk) - Beijing SL will make an upfront gross payment of **$2.5 million** and is eligible for up to **$6 million** in development/regulatory milestones and up to **$20 million** in global net sales milestones[95](index=95&type=chunk) - Gemphire will receive tiered royalties ranging from **mid-teens to twenty percent** on the net sales of all Licensed Products in the Territory[96](index=96&type=chunk) [Merger Agreement with NeuroBo](index=20&type=section&id=Merger%20Agreement%20with%20NeuroBo) Gemphire entered an all-stock merger agreement with NeuroBo, resulting in Gemphire security holders owning about 4% of the combined entity - Gemphire entered into an all-stock merger agreement with NeuroBo Pharmaceuticals, Inc on July 24, 2019[102](index=102&type=chunk) - Post-merger, Gemphire security holders are expected to own approximately **4.06%** and NeuroBo security holders approximately **95.94%** of the combined company on a fully-diluted basis[103](index=103&type=chunk) - The merger is subject to stockholder approvals, Nasdaq listing, conversion of NeuroBo preferred stock/notes, and Gemphire meeting a minimum net cash amount of **negative $3 million**[105](index=105&type=chunk) [Contingent Value Rights Agreement](index=21&type=section&id=Contingent%20Value%20Rights%20Agreement) Stockholders will receive non-transferable CVRs entitling them to 80% of future net proceeds from gemcabene monetization - Stockholders will receive one CVR per share, entitling them to **80% of Gross Consideration** (less deductions) from future gemcabene rights grants/sales over a 15-year term[109](index=109&type=chunk) - The combined company will commit **$1 million** to support gemcabene development through March 31, 2020, but has no further obligation to develop or monetize gemcabene after this period[109](index=109&type=chunk)[250](index=250&type=chunk) - CVRs are **not transferable** (except in limited circumstances), will not accrue interest, and will not be registered or listed for trading[109](index=109&type=chunk) [Change in Control Payments and Severance Awards](index=21&type=section&id=Change%20in%20Control%20Payments%20and%20Severance%20Awards) Executive employment agreements were amended to provide lump sum cash payments and restricted stock awards upon the merger's completion - Key executives (Dr Gullans, Dr Bisgaier, Mr Reno) will receive lump sum cash payments totaling **$702,536** upon merger completion, in lieu of prior severance[110](index=110&type=chunk) - Executives also received restricted stock awards (300,000, 100,000, and 100,000 shares, respectively) that fully vest immediately prior to the merger's effective time, contingent on a release of claims[111](index=111&type=chunk)[112](index=112&type=chunk) - Non-employee directors (45,000 shares) and other employees (62,000 shares) also received restricted stock awards[113](index=113&type=chunk) [Nasdaq Compliance](index=22&type=section&id=Nasdaq%20Compliance) Gemphire received a Nasdaq notice for failing to meet the minimum bid price requirement and has until February 2020 to regain compliance - On August 8, 2019, Gemphire received a Nasdaq notice for non-compliance with the **$1.00 minimum bid price rule**[115](index=115&type=chunk) - The company has 180 calendar days (until **February 4, 2020**) to regain compliance[115](index=115&type=chunk) - Gemphire believes the proposed merger with NeuroBo, including a **reverse stock split**, will address the Nasdaq compliance issue[117](index=117&type=chunk)[145](index=145&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=23&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses reduced operating expenses and net losses, highlighting the critical importance of the proposed NeuroBo merger for liquidity [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) This section provides a cautionary statement that forward-looking statements are subject to risks and uncertainties - The report contains forward-looking statements based on management's beliefs and estimates, subject to known and unknown risks and uncertainties[120](index=120&type=chunk)[121](index=121&type=chunk) - The company operates in a competitive and rapidly changing environment, with new risks emerging, making it difficult to predict all factors impacting future results[121](index=121&type=chunk) - The company undertakes no obligation to publicly update any forward-looking statement, except as required by law[122](index=122&type=chunk) [Overview](index=23&type=section&id=Overview) Gemphire is a clinical-stage biopharma with a significant accumulated deficit, relying on external financing for its operations - Gemphire is a clinical-stage biopharmaceutical company focused on dyslipidemia and NAFLD/NASH, with gemcabene as its lead therapeutic compound[123](index=123&type=chunk) - Gemcabene has been tested in over **1,100 subjects** across 25 Phase 1 and Phase 2 clinical trials, showing promising efficacy, safety, and tolerability[123](index=123&type=chunk) - The company has incurred net losses of **$6.7 million** for the six months ended June 30, 2019, and has an accumulated deficit of **$90.8 million** as of June 30, 2019[128](index=128&type=chunk) [Key Developments](index=24&type=section&id=Key%20Developments) Key developments include mixed clinical trial results, an FDA partial clinical hold, and the strategic merger with NeuroBo [Clinical and Research Program Updates](index=24&type=section&id=Clinical%20and%20Research%20Program%20Updates) Gemcabene showed positive Phase 2b results but a pediatric NAFLD trial was halted early, and an FDA partial clinical hold remains - Gemcabene's Phase 2b trials for HoFH, hypercholesterolemia (ROYAL-1), and SHTG (INDIGO-1) achieved **statistical significance for primary endpoints**[130](index=130&type=chunk) - A Phase 2a pediatric NAFLD trial was **halted early** due to "unanticipated problems," including increased ALT, liver fat, weight, and triglycerides in some patients[131](index=131&type=chunk) - Top-line data from a Phase 2a FPLD trial showed a median **19.6% reduction in serum triglycerides** at 12 weeks[134](index=134&type=chunk)[135](index=135&type=chunk) - The FDA maintained a **partial clinical hold** on gemcabene, requesting additional preclinical studies to be submitted in Q4 2019, delaying the End of Phase 2 meeting[136](index=136&type=chunk) [Pfizer License Agreement](index=25&type=section&id=Pfizer%20License%20Agreement) The Pfizer license agreement was renegotiated in 2018, extending the first commercial sale deadline to April 2024 - The gemcabene in-licensing agreement with Pfizer was renegotiated in Q3 2018, extending the first commercial sale deadline to **April 2024**[137](index=137&type=chunk) [Workforce Reduction](index=25&type=section&id=Workforce%20Reduction) A 33% workforce reduction was implemented in September 2018 to conserve cash, resulting in $1.6 million in charges - A workforce reduction of 5 employees (**33% of workforce**) was approved in September 2018 to reduce costs due to FDA delays[138](index=138&type=chunk) - The reduction resulted in approximately **$1.6 million in charges**, including $0.5 million cash severance and $1.1 million non-cash for accelerated stock option vesting[138](index=138&type=chunk) [SVB Loan Repayment](index=26&type=section&id=SVB%20Loan%20Repayment) The company fully prepaid its outstanding term loan with Silicon Valley Bank in January 2019 - The outstanding term loan with Silicon Valley Bank was **fully prepaid** in January 2019[140](index=140&type=chunk) [Nasdaq Compliance](index=26&type=section&id=Nasdaq%20Compliance) The company is addressing multiple Nasdaq non-compliance issues, with the proposed NeuroBo merger expected to resolve them - Gemphire transferred its common stock listing to the **Nasdaq Capital Market** in May 2019 due to non-compliance with the minimum stockholders' equity requirement[141](index=141&type=chunk)[142](index=142&type=chunk) - On August 8, 2019, the company received a Nasdaq notice for failing to meet the **$1.00 minimum bid price rule**, with a compliance period until February 4, 2020[143](index=143&type=chunk) - The proposed merger with NeuroBo, including a **reverse stock split**, is expected to address the Nasdaq compliance matter[145](index=145&type=chunk) [Review of Strategic Alternatives](index=27&type=section&id=Review%20of%20Strategic%20Alternatives) The Board established a committee in December 2018 to review strategic alternatives to maximize stockholder value - In December 2018, a Board committee was formed to review strategic alternatives to maximize stockholder value, with Ladenburg Thalmann & Co Inc as financial advisor[149](index=149&type=chunk) [License and Collaboration Agreement](index=27&type=section&id=License%20and%20Collaboration%20Agreement) Gemphire entered an exclusive license agreement with Beijing SL for gemcabene in Greater China - On July 23, 2019, Gemphire granted Beijing SL an exclusive royalty-bearing license for gemcabene in mainland China, Hong Kong, Macau, and Taiwan[150](index=150&type=chunk) [Merger Agreement with NeuroBo](index=27&type=section&id=Merger%20Agreement%20with%20NeuroBo) The company entered a definitive merger agreement with NeuroBo, expected to close in the second half of 2019 - Gemphire entered into a merger agreement with NeuroBo on July 24, 2019, with NeuroBo becoming a wholly-owned subsidiary in an all-stock transaction[151](index=151&type=chunk) - The merger includes a **Contingent Value Rights (CVR) Agreement** for Gemphire stockholders[151](index=151&type=chunk) - The merger is expected to close in the **second half of 2019**, subject to stockholder approvals and other conditions, with material fees and costs[151](index=151&type=chunk) [Financial Operations Overview](index=27&type=section&id=Financial%20Operations%20Overview) The company has generated no revenue and anticipates reduced operating expenses in the near term due to the clinical hold on gemcabene [Revenue](index=27&type=section&id=Revenue) Gemphire has not generated any revenue to date and does not expect to until gemcabene is commercialized or milestones are met - Gemphire has **not generated any revenue to date** and does not expect to until regulatory approval and commercialization of gemcabene or other product candidates[153](index=153&type=chunk) - Revenue generation is also contingent on meeting certain development and commercialization milestones under the **Beijing SL Agreement**[153](index=153&type=chunk) [Operating Expenses](index=28&type=section&id=Operating%20Expenses) Operating expenses, comprising G&A and R&D, are expected to trend lower in the near term but R&D will increase with later-stage development [General and Administrative](index=28&type=section&id=General%20and%20Administrative) General and administrative expenses are expected to trend lower due to reduced research and development activities - General and administrative expenses primarily consist of personnel-related costs, legal fees for intellectual property and corporate matters, and professional accounting services[157](index=157&type=chunk) - These expenses are anticipated to trend below comparable prior period levels due to reduced research and development activities[157](index=157&type=chunk) [Research and Development](index=28&type=section&id=Research%20and%20Development) R&D expenses are expected to decrease in the near term due to the FDA clinical hold but increase significantly in later stages - Research and development expenses are primarily for gemcabene's clinical development, expensed as incurred, including compensation, preclinical/clinical studies, regulatory, and manufacturing costs[158](index=158&type=chunk) - R&D expenses are expected to trend lower in the near future due to reduced activities related to the **FDA clinical hold**[159](index=159&type=chunk) - R&D expenses are projected to **increase significantly** in later stages of clinical development due to increased size and duration of trials[159](index=159&type=chunk) [Interest Income (Expense), net](index=29&type=section&id=Interest%20Income%20(Expense)%2C%20net) Net interest expense fluctuated due to the Term Loan prepayment and changes in cash balances - Interest income (expense), net, includes cash and non-cash interest from the Term Loan (prepaid Jan 2019) and interest on cash/cash equivalents[162](index=162&type=chunk) - The decrease in interest expense in Q2 2019 was due to the Term Loan repayment, while interest income decreased due to lower cash balances[171](index=171&type=chunk) [Other Expense, net](index=29&type=section&id=Other%20Expense%2C%20net) Other expenses primarily consist of transaction costs related to the review of strategic alternatives - Other expense, net, primarily comprises non-operating transaction costs related to strategic alternatives review and fluctuating foreign currency exchange gains/losses[163](index=163&type=chunk) [Provision for Income Taxes](index=29&type=section&id=Provision%20for%20Income%20Taxes) The company has no provision for income taxes due to operating losses and a full valuation allowance - No provision for income taxes exists due to operating losses and a **full valuation allowance** on net deferred tax assets[164](index=164&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) The company's net loss decreased significantly due to substantial reductions in both G&A and R&D expenses [Comparison of Three Months Ended June 30, 2019 and 2018](index=30&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202019%20and%202018) Operating expenses for Q2 2019 decreased by $4.2 million year-over-year, driven by reduced clinical trial activities Operating Expenses - Q2 Comparison (in thousands) | Operating Expense | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | Change | | :-------------------------- | :--------------------------- | :--------------------------- | :------- | | General and administrative | $1,115 | $2,574 | $(1,459) | | Research and development | $1,234 | $3,960 | $(2,726) | | Total operating expenses | $2,349 | $6,534 | $(4,185) | - Interest income (expense), net, improved by **$0.15 million**, from $(0.144) million in 2018 to $0.01 million in 2019, due to the Term Loan not being outstanding[165](index=165&type=chunk)[171](index=171&type=chunk) - Other expense increased by **$0.581 million** in 2019 due to non-operating transaction costs associated with strategic alternatives review[165](index=165&type=chunk)[172](index=172&type=chunk) [Comparison of Six Months Ended June 30, 2019 and 2018](index=30&type=section&id=Comparison%20of%20Six%20Months%20Ended%20June%2030%2C%202019%20and%202018) Operating expenses for H1 2019 decreased by $8.4 million year-over-year, while net interest expense increased due to loan prepayment Operating Expenses - H1 Comparison (in thousands) | Operating Expense | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | Change | | :-------------------------- | :--------------------------- | :--------------------------- | :------- | | General and administrative | $2,522 | $4,661 | $(2,139) | | Research and development | $2,627 | $8,937 | $(6,310) | | Total operating expenses | $5,149 | $13,598 | $(8,449) | - Net interest expense increased by **$0.516 million**, from $(0.304) million in 2018 to $(0.820) million in 2019, primarily due to non-cash acceleration of debt discount amortization from the Term Loan prepayment[165](index=165&type=chunk)[177](index=177&type=chunk) - Other expense increased by **$0.752 million** in 2019 due to non-operating transaction costs associated with strategic alternatives review[165](index=165&type=chunk)[178](index=178&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) Cash decreased by $15.3 million in H1 2019, a sharp reversal from a $9.6 million increase in H1 2018 due to financing activities [Cash Flow from Operating Activities](index=31&type=section&id=Cash%20Flow%20from%20Operating%20Activities) Cash used in operating activities decreased to $5.0 million in H1 2019 from $13.5 million in H1 2018, primarily due to a lower net loss Net Cash Used in Operating Activities (in thousands) | Operating Activities | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Net cash used in operating activities | $(5,037) | $(13,514) | $8,477 | - The decrease in cash used in operating activities was primarily due to a **lower net loss** ($6.7 million in 2019 vs $13.9 million in 2018), adjusted by share-based compensation and non-cash discount amortization[180](index=180&type=chunk)[181](index=181&type=chunk) [Cash Flow from Investing Activities](index=31&type=section&id=Cash%20Flow%20from%20Investing%20Activities) There were no cash flows from investing activities during the reported periods - No cash flows from investing activities were reported for any periods presented[182](index=182&type=chunk) [Cash Flow from Financing Activities](index=31&type=section&id=Cash%20Flow%20from%20Financing%20Activities) Financing activities used $10.3 million in H1 2019 for loan repayment, contrasting with $23.1 million provided in H1 2018 from an offering Net Cash (Used in) Provided by Financing Activities (in thousands) | Financing Activities | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Net cash (used in) provided by financing activities | $(10,259) | $23,080 | $(33,339) | - Cash used in financing activities in H1 2019 was primarily for the **$10.3 million repayment of the Term Loan**[183](index=183&type=chunk) - Cash provided by financing activities in H1 2018 was mainly from **$23.1 million net proceeds** from the Follow-On Offering[186](index=186&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company's $3.6 million in cash is insufficient for the next 12 months, making the proposed merger with NeuroBo critical for survival - As of June 30, 2019, Gemphire had approximately **$3.6 million in cash and cash equivalents**[187](index=187&type=chunk) - Current cash is **insufficient to fund operations for the next 12 months**, and the ability to raise additional funds is severely harmed by the FDA's clinical hold and trial termination[190](index=190&type=chunk)[191](index=191&type=chunk) - The proposed merger with NeuroBo is critical; if it fails, the company may be required to **significantly reduce operations, delay development, or face dissolution and liquidation**[190](index=190&type=chunk)[192](index=192&type=chunk) [Beijing SL Agreement](index=34&type=section&id=Beijing%20SL%20Agreement) The license agreement with Beijing SL provides an upfront payment of $2.5 million and potential future milestone payments - Gemphire entered a license agreement with Beijing SL on July 23, 2019, for gemcabene in mainland China, Hong Kong, Macau, and Taiwan[196](index=196&type=chunk) - The agreement includes an upfront gross payment of **$2.5 million** and potential future milestone and royalty payments[196](index=196&type=chunk) [Term Loan](index=34&type=section&id=Term%20Loan) The Term Loan was fully prepaid in January 2019, with a success fee contingent on the NeuroBo merger - The Term Loan with Silicon Valley Bank was fully prepaid on January 28, 2019, for approximately **$8.9 million principal and $1.0 million interest/fees**[197](index=197&type=chunk) - A **$350,000 success fee** will be triggered upon the completion of the NeuroBo merger[198](index=198&type=chunk) - A warrant to purchase **36,000 shares** of common stock remains outstanding[198](index=198&type=chunk) [Facility Lease](index=35&type=section&id=Facility%20Lease) The company's headquarters lease expired on August 31, 2019 - The company has a non-cancellable facility lease for its headquarters from September 1, 2016, to **August 31, 2019**[201](index=201&type=chunk) - Monthly base rent is approximately **$8,900** during the last year of the lease agreement[201](index=201&type=chunk) [Pfizer Agreement](index=35&type=section&id=Pfizer%20Agreement) The Pfizer license agreement includes potential milestone payments up to $37 million and requires commercially reasonable development efforts - The exclusive license agreement with Pfizer for gemcabene includes potential milestone payments up to **$37 million** and tiered royalties on net sales[204](index=204&type=chunk)[205](index=205&type=chunk) - Gemphire is obligated to use **commercially reasonable efforts** to develop and commercialize gemcabene[205](index=205&type=chunk) - The agreement expires upon the expiration of the last Royalty Term, after which Gemphire will have a perpetual, fully paid-up, royalty-free license[206](index=206&type=chunk) [Other Commitments](index=36&type=section&id=Other%20Commitments) The company has cancellable purchase commitments with suppliers for research and clinical services - The company has cancellable purchase commitments with suppliers for research, clinical services, and raw materials, subject to change based on R&D efforts[209](index=209&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies and estimates had no material changes during the second quarter of 2019 - Financial statements are prepared in accordance with GAAP, requiring management estimates and judgments[210](index=210&type=chunk) - **No material changes** to critical accounting policies or estimates occurred during the three months ended June 30, 2019[211](index=211&type=chunk) [Off‑Balance Sheet Arrangements](index=36&type=section&id=Off‑Balance%20Sheet%20Arrangements) The company did not have any off-balance sheet arrangements - The company did not have any off-balance sheet arrangements during the periods presented and currently has none[212](index=212&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) A discussion of recently issued accounting pronouncements is available in Note 2 of the financial statements - Refer to Note 2 for a discussion of recently issued accounting pronouncements[213](index=213&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This item is not applicable as no quantitative and qualitative disclosures about market risk are provided - This section is marked "Not applicable"[214](index=214&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=36&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were effective as of June 30, 2019, with no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=36&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were **effective** as of June 30, 2019[220](index=220&type=chunk) - The company recognizes that controls provide only **reasonable assurance** due to inherent limitations like faulty judgments and resource constraints[216](index=216&type=chunk)[219](index=219&type=chunk) [Changes in Internal Control Over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2019 - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2019[221](index=221&type=chunk) PART II – OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=37&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company believes the resolution of any ordinary course legal claims will not have a material adverse effect on its financials - The company may face ordinary course legal claims but believes their resolution will not materially adversely affect its financial position, results, or cash flows[222](index=222&type=chunk) [ITEM 1A. RISK FACTORS](index=37&type=section&id=ITEM%201A.%20RISK%20FACTORS) Key risks include Nasdaq non-compliance, potential failure of the critical NeuroBo merger, and substantial stockholder dilution - Gemphire is **not in compliance** with Nasdaq's minimum stockholders' equity and minimum bid price requirements, risking delisting[224](index=224&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - The proposed merger with NeuroBo is **critical for addressing Nasdaq compliance and funding operations**; failure to complete it could lead to dissolution and liquidation[231](index=231&type=chunk)[235](index=235&type=chunk)[237](index=237&type=chunk)[239](index=239&type=chunk) - If the merger is completed, current Gemphire stockholders are expected to own only approximately **4.06%** of the combined company, resulting in **substantial dilution**[240](index=240&type=chunk)[242](index=242&type=chunk) - CVRs may **expire valueless** if specified events are not achieved or consideration is insufficient, and the combined company has limited obligation to develop gemcabene after Q1 2020[250](index=250&type=chunk) - The company is substantially dependent on its remaining **8 employees** to facilitate the merger[257](index=257&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=43&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This item is not applicable as no unregistered sales of equity securities or use of proceeds are reported - This section is marked "Not applicable"[260](index=260&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=43&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable as no defaults upon senior securities are reported - This section is marked "Not applicable"[261](index=261&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=43&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable as no mine safety disclosures are reported - This section is marked "Not applicable"[262](index=262&type=chunk) [ITEM 5. OTHER INFORMATION](index=43&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This item is not applicable as no other information is reported - This section is marked "Not applicable"[263](index=263&type=chunk) [ITEM 6. EXHIBITS](index=44&type=section&id=ITEM%206.%20EXHIBITS) This section lists key agreements filed with the report, including the NeuroBo merger and Beijing SL license agreements - Key exhibits include the **Merger Agreement with NeuroBo**, CVR Agreement, voting agreements, and the **License and Collaboration Agreement with Beijing SL**[266](index=266&type=chunk) - Also listed are amendments to executive employment agreements and restricted stock grant notices[266](index=266&type=chunk) SIGNATURES [SIGNATURES](index=46&type=section&id=SIGNATURES) The report is signed by the President and Chief Executive Officer on August 9, 2019 - The report was signed by Steven Gullans, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer), on **August 9, 2019**[271](index=271&type=chunk)

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=ITEM%201%3A%20Financial%20Statements) Gemphire Therapeutics reported a net loss of **$3.8 million** for Q1 2019, an improvement from **$7.2 million** in Q1 2018, driven by reduced R&D expenses, but with **$5.5 million** cash and declining assets, raising substantial doubt about its going concern Condensed Balance Sheet Highlights (in thousands) | | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $ 5,510 | $ 18,954 | | Total current assets | $ 6,106 | $ 19,686 | | Total assets | $ 6,158 | $ 19,694 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $ 1,712 | $ 11,919 | | Total liabilities | $ 1,712 | $ 11,920 | | Total stockholders' equity | $ 4,446 | $ 7,774 | Condensed Statements of Comprehensive Loss (in thousands, except per share amounts) | | For the Three Months Ended March 31, | | | :--- | :--- | :--- | | | **2019** | **2018** | | General and administrative | $ 1,407 | $ 2,087 | | Research and development | $ 1,393 | $ 4,977 | | Total operating expenses | $ 2,800 | $ 7,064 | | Net loss | $ (3,801) | $ (7,224) | | Net loss per share (basic and diluted) | $ (0.27) | $ (0.58) | Condensed Statements of Cash Flows Highlights (in thousands) | | For the Three Months Ended March 31, | | | :--- | :--- | :--- | | | **2019** | **2018** | | Net cash used in operating activities | $ (3,170) | $ (7,236) | | Net cash (used in) provided by financing activities | $ (10,259) | $ 23,224 | | Net (decrease) increase in cash | $ (13,429) | $ 15,988 | | Cash, cash equivalents and restricted cash at end of period | $ 5,525 | $ 34,461 | - The company has incurred losses since inception, with an accumulated deficit of **$87.9 million** as of March 31, 2019, and its cash balance of **$5.5 million** is insufficient to fund operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern[27](index=27&type=chunk)[28](index=28&type=chunk) - On January 28, 2019, the company fully prepaid its term loan with Silicon Valley Bank, including approximately **$8.9 million** in principal and interest and a **$1.0 million** final payment fee, leading to **$0.8 million** in unamortized note discounts recognized as interest expense[50](index=50&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=ITEM%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's Q1 2019 net loss decreased to **$3.8 million** from **$7.2 million** in Q1 2018, driven by a **$3.6 million** reduction in R&D expenses due to a partial clinical hold on gemcabene, with **$5.5 million** cash projected to last only into Q3 2019, necessitating additional capital and strategic alternatives Comparison of Operating Results (in thousands) | | For the Three Months Ended March 31, | Change | | :--- | :--- | :--- | :--- | | | **2019** | **2018** | | | General and administrative | $ 1,407 | $ 2,087 | $ (680) | | Research and development | $ 1,393 | $ 4,977 | $ (3,584) | | Total operating expenses | $ 2,800 | $ 7,064 | $ (4,264) | | Net loss | $ (3,801) | $ (7,224) | $ 3,423 | - R&D expenses decreased by **$3.6 million** in Q1 2019 compared to Q1 2018, primarily due to reduced clinical trial activities while the company works to resolve the FDA's partial clinical hold on gemcabene[132](index=132&type=chunk) - As of March 31, 2019, the company had **$5.5 million** in cash and cash equivalents, which management believes are sufficient to fund operations only into the third quarter of 2019, necessitating additional capital for continued development[137](index=137&type=chunk)[149](index=149&type=chunk) - The FDA has maintained a partial clinical hold on gemcabene, preventing studies longer than six months, with the company conducting additional preclinical studies for submission in Q4 2019, and an End of Phase 2 meeting contingent on the hold being lifted[110](index=110&type=chunk) - In December 2018, the Board of Directors initiated a review of strategic alternatives to maximize stockholder value, engaging Ladenburg Thalmann & Co. Inc. as a strategic financial advisor[113](index=113&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=ITEM%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company indicates that this section is not applicable - The company has indicated that this section is not applicable[170](index=170&type=chunk) [Controls and Procedures](index=31&type=section&id=ITEM%204%3A%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2019, the company's principal executive and financial officer concluded that its disclosure controls and procedures were effective[173](index=173&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, its internal control[174](index=174&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=ITEM%201%3A%20Legal%20Proceedings) The company may face ordinary course claims and lawsuits, but believes their resolution will not materially adversely affect its financial position or results - The Company may be subject to claims and lawsuits arising primarily in the ordinary course of business, but believes their ultimate resolution will not have a material adverse effect on its financial position, results of operations, or cash flows[175](index=175&type=chunk) [Risk Factors](index=32&type=section&id=ITEM%201A%3A%20Risk%20Factors) The company faces delisting risk due to non-compliance with Nasdaq's **$10 million** equity requirement, prompting a plan to transfer to the Nasdaq Capital Market with a **$2.5 million** equity requirement, as failure to comply could negatively impact stock liquidity and capital raising - On March 20, 2019, the company received a Nasdaq notice for non-compliance with the **$10 million** minimum stockholders' equity requirement for continued listing on the Nasdaq Global Market[180](index=180&type=chunk) - On May 6, 2019, the company submitted a plan to regain compliance by applying to transfer its common stock listing to The Nasdaq Capital Market, which has a lower minimum stockholders' equity requirement of **$2.5 million**[181](index=181&type=chunk) - If delisted, the company's common stock could be subject to penny stock regulations, adversely affecting its market liquidity, price, and ability to obtain financing[183](index=183&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=ITEM%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company indicates that this section is not applicable - The company has indicated that this section is not applicable[186](index=186&type=chunk) [Default upon Senior Securities](index=33&type=section&id=ITEM%203%3A%20Default%20upon%20Senior%20Securities) The company indicates that this section is not applicable - The company has indicated that this section is not applicable[187](index=187&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=ITEM%204%3A%20Mine%20Safety%20Disclosures) The company indicates that this section is not applicable - The company has indicated that this section is not applicable[188](index=188&type=chunk) [Other Information](index=33&type=section&id=ITEM%205%3A%20Other%20Information) This section reiterates the company's Nasdaq non-compliance notice received on March 20, 2019, for failing to meet the **$10 million** minimum stockholders' equity, and its plan submitted on May 6, 2019, to transfer to the Nasdaq Capital Market for compliance - This section repeats information from the Risk Factors section regarding the Nasdaq non-compliance notice received on March 20, 2019, and the subsequent plan submitted on May 6, 2019, to transfer to the Nasdaq Capital Market[189](index=189&type=chunk)[190](index=190&type=chunk) [Exhibits](index=34&type=section&id=ITEM%206%3A%20Exhibits) This section lists exhibits filed with the 10-Q report, including corporate governance documents, officer certifications (SOX 302 & 906), and XBRL data files - Lists filed exhibits, including corporate governance documents, officer certifications (SOX 302 & 906), and XBRL data files[192](index=192&type=chunk) Signatures The report was duly signed on May 9, 2019, by Steven Gullans, President and Chief Executive Officer, who also serves as Principal Executive Officer and Principal Financial Officer - The report was signed on May 9, 2019, by Steven Gullans, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)[196](index=196&type=chunk)